Tax Limitation: The Case of Missouri

Executive Summary Since the end of the last recession in 1992, the U.S. economy has been growing steadily. The boom has caused state and local government tax collections to surge and many states are now faced with large and growing budget surpluses. Policymakers must decide to pursue one of two general options—spend the surplus or return it to the taxpayers. Most states, to varying degrees, have chosen the latter option.

However, the methods used to return excess tax collections differ from state to state. Some states have simply enacted a temporary refund or lowered tax rates. Alternatively, six states have either a legislative or constitutional tax limitation provision—Arizona, Colorado, Ohio, Oregon, Massachusetts and Missouri. These limitations are automatically determined every year and if certain conditions are met (such as the growth in tax collection exceeding growth in personal income) the state is obligated to return the excess amount to the taxpayers.

This paper focuses on one such state, Missouri. A 30-year period of Missouri’s state and local tax burden is presented and compared with other states. The paper focuses on the current and expected fiscal effects of Missouri’s constitutional provision limiting taxes-the Hancock Amendment.

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